Once the crisis became apparent, Levin said, rating agencies failed to acknowledge the problems fast enough. That led to mass downgrades of billions in investments, shocking the financial system and triggering the crisis, Levin said.

"By first instilling unwarranted confidence in high-risk securities and then failing to downgrade them in a responsible manner, the credit rating agencies share blame for the massive economic damage that followed," the Michigan Democrat said.

Levin said the Obama administration's proposed overhaul of financial regulation should address the "conflict of interest" for agencies that compete for bank fees. He said the Senate will vote on amendments that would do so when it takes up the bill, possibly next week.

Top executives of Moody's Corp. and Standard & Poor's, a division of McGraw-Hill, will answer questions from Levin's panel in a hearing Friday. Billionaire investor Warren Buffett's Berkshire Hathaway Inc. was the largest shareholder of Moody's during the run-up to the financial crisis, but has since reduced its stake.

Document excerpts released by the panel Thursday also shed new light on the complex financial deals at the heart of civil fraud charges against Goldman Sachs Group Inc.

In one e-mail excerpt, a Moody's employee wrote, "I am getting serious pushback from Goldman on a deal that they want to go to market with today."

In another, an S&P analyst criticizes a deal like the one at the center of the charges by the Securities and Exchange Commission. "Don't even get me started on the language he cites ... which is one of the reasons I said the counterparty criteria is totally messed up," the person writes.

The subcommittee's report says the agencies used flawed data and allowed banks undue influence over the investments' ratings.

Investors rely on rating agencies for impartial analysis of financial products. Letter grades assigned by the agencies help determine whether the potential profit from an investment is worth the risk.

The subcommittee's 18-month investigation exposes cozy relationships between credit analysts and banks that were bundling pools of mortgages into complex investments. The banks wanted high ratings for the deals so investors would find them attractive, it found.

In 2006, the Standard & Poor's group that rated mortgage-backed securities had "become so beholden to their top issuers (investment banks) for revenue that they have all developed a kind of Stockholm syndrome which they mistakenly tag as Customer Value creation," a concerned S&P employee wrote in an e-mail excerpt released by the probe.

Part of the problem was the data agencies were using. They assumed homeowners would default at rates similar to those seen in the past. But the old data had been collected at a time when most mortgages carried fixed rates and went to borrowers with strong credit.